Bitcoin Self-Custody Creates Cost-Basis Reporting Blind Spots for 2026 Taxes

Bitcoin investors who withdraw assets to self-custody and later return them to an exchange may find their sales classified as noncovered for tax reporting purposes. Under the 2026 US IRS Form 1099-DA instructions, brokers are required to report sale proceeds, but reporting the acquisition cost (cost basis) remains voluntary for assets not continuously held in the same custodial account since acquisition. This creates a discrepancy where the broker reports the sale but not the cost basis, even if the asset is returned to the original account. The distinction between covered and noncovered assets persists as international reporting standards evolve and blockchain analytics provide tax authorities with greater visibility.